Typically, you would face a 10% penalty if you make an early distribution from a 401(k) or other Qualified Retirement Plan (QRP) before you turn 59 1/2. But the government allows various exceptions — including one specifically for people older than 55.

Happy Birthday!

Birthdays are important milestones for people.  Some like to ignore them, or at least try to stop the clock.  How many perpetual 39 year olds do you know?  But most choose to celebrate the occasion with family and friends.  Whether you choose a loud party with many or a quiet celebration with only a few, we would like to add our best to you on that special day.

When it comes to personal finance, there are a number of birthdays that carry some varying levels of significance.  For example, when someone reaches the age of 18, they have reached legal age and those  accounts held under the Uniform Gifts to Minors designations can be changed to reflect their coming of age.

One of the other important birthdays for young adults is their 21^st.  They will now be eligible to join their 401k plan at work.  Most plans exclude those younger than 21 and more important don’t make matching contributions to those younger employees either.  In this age of more responsibility for retirement falling onto the shoulders of the individual, the earlier you get started the better.

Many of the important birthdays are related to retirement and retirement account related issues.  Without getting too specific, here are some of the more important ones.  If you turn 50 this year, you can now start adding more money into your 401k, IRA or Roth.  These catch up provisions can help you really grow your nest egg as you head down the home stretch of your career.  At age 55 you can take a lump sum distribution from your 401k if you leave your job during this calendar year without being subject to the 10% early withdrawal penalty.  Sorry, this doesn’t apply to IRAs, but once you reach 59 ½  that penalty goes away as well.  You still won’t be required to take distributions from that IRA until you turn 70 ½.

If you reach your 65^th  birthday this year, you will become eligible for Medicare.  If you are not employed, sign up within the initial 3 month enrollment period that starts on your birthday.  The premiums increase by 10% each year you are eligible and fail to enroll.  If you are still employed, and covered by a plan, you’ll want to sign up as soon as you leave employment to avoid these higher premiums.

When it comes to Social Security benefits, there are an almost countless number of options concerning when to file.  You should definitely be sitting down with your trusted advisors to see what makes the most sense for your personal situation.  In general, you can start claiming Social Security benefits at age 62, but these payments will be approximately 25% less than what you would receive at age 66, which is the full retirement age for those born between 1943 and 1954.  The retirement age for younger workers is higher, topping out at 67 for those born after 1960.  You will receive maximum benefits if you wait until age 70 to collect.  After age 70, there isn’t any additional benefit to waiting.

If you will be 70 ½ this year, you need to start taking distributions from your IRA.  Failing to do so can result in penalties of 50% of the amount you fail to take out.  Nobody likes Uncle Sam that much!  If you reach 70 ½ this year, make plans to get these distributions set up.

Lastly,  we would propose that you use the anniversary of your birth to sit down and evaluate, and rebalance if needed, your retirement accounts.  Just like an annual physical, a quick financial physical can help head off problems and get you back on track.

Should you have any questions related to this material, please give us a call and we’ll be glad to help.

Happy Birthday.

As we bring the first month of 2012 to a close, it is probably a good time to look back at those resolutions that you made, those you should have made and those resolutions that have may have already fallen behind.  Here are a few financial resolutions that you may want to add to the list.  Some of these will only take a short time on a snowy day.

As you should be starting to receive the annual flurry of year end tax documentation, there are a couple of things that you might resolve to do .  First, set up a file folder to capture all the 1099s, W-2s etc.  Getting them all in one spot now will save an awful lot of headache and hassle when you head off to start your 2011 tax returns.  Second, look for opportunities to consolidate your accounts into one place for your taxable accounts and one for your qualified accounts.  Besides eliminating all that paper mess, this consolidation will make your allocation and diversification decisions much easier to understand and implement.  It may be even more important for your qualified accounts.

If you will reach your 70^th birthday this year, resolve to sit down with us to be sure  that you are clear on the important dates and requirements for beginning your IRA distributions.

There are new rules that will go into effect this year concerning the tax treatment of mutual fund shares that are purchased/sold in 2012 and beyond.  You may have already been asked to choose among a number of different tax treatments.  While you can always change the choice you have elected, you cannot change it after you have made your sale.  Please resolve to ask any questions you may have about this most important tax manner soon.

Resolve to take the time to dive a little deeper into your 401k (or 403b etc.) account.  The limits for how much you can contribute have been raised for this year.  If you have, or will, reach the age of 50 this year, you may also be eligible to take advantage of catch up provisions.  This will enable you to put away even more of your earnings on a pre-tax basis.  You should also check to see if there are any new options in your plan.  New investment choices may help to more effectively diversify your account.  Many larger plans have begun to offer Roth options as well.   Even if you cannot afford to make the maximum contributions, resolve to increase your contributions by at least 1%.  You’ll be glad you did.

While you are digging into your retirement plan information, take a quick look at the beneficiaries you have listed.  Many people are surprised to find that there are changes that they intended to make that never got done.  This is also important for your IRA accounts, your will or trust or insurance policies.  Resolve to check out the beneficiaries to your financial affairs.  A little work now could save a lot of trouble later.

There are some additional financial resolutions you might consider.  Mortgages rates are the lowest in our lifetimes.  Resolve to look into whether refinancing may make sense for your situation.  When was the last time you had your personal insurance reviewed?  Resolve to look into whether you are getting the best bang for your buck with any discounts available for bundling your car and house together or whether your deductible still makes sense.  Resolve to save some money and improve your insurance coverage in 2012.

Take a look at your bank.  Is that “free” checking account you signed up for really free?  Do you still need the points that they once offered on their credit card?  Are there any other services they offer that you aren’t taking advantage of?

Are you set up to make any of your regular bill payments electronically?  Besides saving the postage and supplies, many of the these institutions make it easier to set up payments in advance and also to send reminders for you so that late payment charges will be a thing of the past.  Take a look at your cell phone plan.  Is it still appropriate for your actual usage?  Can it be bundled with your home phone for additional savings?  Resolve to look at a couple of the biggest ticket items in your budget, you may be surprised to find out how much money you might save.

As always, we look forward to helping you answer any questions you may have on these ideas.  Here’s wishing you and your family a successful and healthy 2012!

As 2011 draws to a close, there is still time to make some smart financial moves to help lower your tax bill.  These ideas are presented generally and you should consult the appropriate professionals to see which may make sense for you.

At Home

There are home energy tax credits available for you if you make energy efficient improvements on your house.  This credit is equal to 10% of the cost with a maximum of $500 (new doors, heating and cooling equipment, etc.).  This credit expires at the end of this year, but there is also a tax credit available for the the installation renewable energy equipment (solar panels, geothermal heating etc.)  that doesn’t expire until 2016.  Details are available at www.energystar.gov.

Gifts to charity are an opportunity to do well by doing good.  You can clean out the closets, the pantry or even the garage.  You can make these gifts in kind or in cash .  A personal favorite is your local food pantry.  Helping these people help others at the holidays is particularly good cheer.

If you are over 70 ½ and are taking distributions from an IRA account, you can make that distribution (up to $100,000) direct to a qualified charity.  While you don’t get a tax deduction for the contribution, the distribution won’t be included in your taxable income.

You may want to spread some cheer among your family members.  You are able to gift $13,000 per person each year.  For example, you and your spouse could each give $13,000 to a daughter and son-in-law to help fund the down payment for a house.  That would be a gift of $52,000 this year!

At Work

Check to see what the balance is in your Flex account.  These balances need to be used by the end of the year or you lose them.  Is it time for  a new pair of glasses?

The biggest opportunity is to max out the allowable contribution to your defined contribution account.  For example, you can make a maximum contribution of $17,000 to you 401k (or 403b).  Don’t forget that if you are over 50, there is a catch up provision that allows you to contribute an additional $5,500 for a total of $22,500.  Of course there are rules related to any of the allowable contributions.  Check with your Human Resources department or at www.irs.gov.

In your Portfolio

For your taxable portfolio, this is the time to take a hard look and make sure you take full advantage of the tax rules related to the gains and losses that you have.  Remember that all of these rules presented are general in nature and your specific personal tax situation is most important.  This could be a great opportunity to reposition your portfolio while gaining some tax benefits.

Before selling a security for a gain, check to make sure if the gain is long term (held for over 1 year).  If it is close, it will usually pay to wait to cross that long term holding mark as your maximum capital gains tax will be 15%.

In addition, if you are looking to sell a security to capture the loss and then wish to buy that security back with a new cost basis, be sure to wait 30 days between transaction in order to not run afoul of what is known as the “wash sale” rule.

The IRS rules allow you to take a maximum $3,000 loss on your tax return each year.  There are many ways to get to that figure.  You may have an individual security that has that amount of loss, you may have a number of securities that have losses adding up to that amount, or you may match any number of gains and losses from securities that equals that $3,000 maximum number.  If you take losses greater than the maximum figure, that loss amount can be carried forward to future tax years.

A couple of other points.  Don’t forget to make any Required Minimum Distributions from your IRA  if you are over the age of 70 ½.  The penalty for failing to do so is 50% of the amount you fail to distribute.  That is a very stiff price to pay.

There are new rules in place concerning how the cost basis of any mutual fund share purchased after 1/1/2011 is reported to the IRS.  You may be receiving forms from your fund or investment custodian asking you to elect the cost method you want to use.  Before making a choice (or leaving the choice to default), contact your advisor to be sure you understand the choices and its implication. Because of these cost basis requirements, your 1099s for the tax year 2011 will look a lot different than those you have gotten in the past.  We’ll have more information available about this soon!

Securities offered through a non-affiliated company, Cambridge Investment Research, Inc., a registered Broker/Dealer, Member FINRA/SIPC.  Investment Advisory Services offered through Cambridge Investment Advisors, Inc. a registered Investment Advisor

For many individuals with steadily rising incomes or who expect higher incomes in retirement than during their working lives, a Roth IRA can be a more attractive investment vehicle than a traditional IRA.

That’s because you make contributions to a Roth IRA using money that’s already been taxed. So your Roth IRA account grows tax-free, and—if you meet certain conditions—you can take tax-free withdrawals during retirement. Did you convert a traditional IRA to a Roth IRA in 2010? Call us TODAY! We may be able to save you money on your 2011 tax bill—if we reverse the conversion by Oct. 17, 2011.

But when taxes are involved, nothing’s ever simple—and a misstep can be costly. The following Q&A will help you get up to speed on Roth IRAs and avoid (or at least minimize) tax penalties.

Q: The benefits of a Roth IRA seem compelling, but how can I decide if a Roth IRA—rather than a traditional IRA—is the way to go?

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Whenever we encounter a period of unexpected stock market turbulence, the main thought on many clients’ minds is, “Can I achieve my investing objectives in these difficult economic times?” How we counsel these concerned clients is no real secret. Consideration of the client’s income needs, deep and broad portfolio diversification, the portfolio’s volatility characteristics and flexibility to adapt the portfolio as needed are all part of the conversation.

We’ve found that this targeted discussion is useful in dissipating emotional reactions to volatile markets or subpar economic conditions—reactions that can drive a portfolio seriously off course. A closer look at each of these four topics will give you a better idea of how we work with clients and our approach to portfolio development and management.

First, income needs. Future needs and objectives should guide the choices made for an investment portfolio. The question that must be asked and answered is: When will the portfolio need to provide income? Reassurance that the investment plan takes into account income needs and their timing goes a long way to help clients react to market movements and economic downturns logically rather than emotionally.

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The ink had barely dried on the contentious debt-ceiling deal in Washington, D.C., when talk of another recession emerged out of nowhere as a hot topic. What’s the likelihood that we’ll have a double-dip recession?

Most would agree the economy isn’t great. The Institute for Supply Management’s July 2011 Report on Business revealed that manufacturing had declined below the consensus forecast, and most key sub-indexes were lower in July than in June (albeit at levels still indicating economic growth). And although the unemployment rate decreased in July, the drop was an anemic 0.10 percent. Moreover, the share of the eligible population holding a job declined in July to 58.1 percent, the lowest percentage since July 1983.

On the plus side, however, corporate earnings are strong, with many companies reporting earnings in excess of expectations. And the Federal Reserve’s announcement that it will keep interest rates near zero until 2013 should reassure companies considering expansion.

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Future Rental Housing at Risk if Credit Crisis Continues

January 19, 2010 – A severe shortage of apartments is likely to result from the anemic pace of multifamily rental property construction, according to industry experts speaking at a press conference today at the National Association of Home Builders’ International Builders’ Show® in Las Vegas. New multifamily construction has been crippled by the credit crisis, leaving the industry unable to gear up for the increased need for market-rate and affordable apartments that is expected to accompany economic recovery beginning next year.

“We desperately need lenders to begin financing apartment communities again,” said NAHB Chief Economist David Crowe. “The vacancy rate for apartments is elevated now, but as the economy recovers and jobs return, the people who’ve been doubling up with relatives and friends will want a place of their own – and there may not be one available.”

Industry leaders predict that with the two- to three-year timeline required to build apartment communities, there will be a severe shortage of apartments in the near future – at the same time that there will likely be a huge need for them, according to demographers. A large number of Generation Y professionals and newly formed households –for whom multifamily is often the most attractive option – are expected to enter the housing market soon. They are likely to find fewer market-rate and affordable rental units to choose from, and higher rents due to increased demand.

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The world of estate planning was turned upside down when the Federal Estate tax was unexpectedly repealed effective January 1, 2010. St. Louis, Missouri, estate planning attorney, Steven Spewak, guides professional advisors and clients through the surprising and unpleasant consequences repeal brings.

St. Louis, MO (PRWEB) February 3, 2010 — When Congress failed to extend the Federal estate tax prior to the end of 2009, the tax was automatically repealed effective January I, 2010. But what appears to be cause for celebration for many, may prove just the opposite.

“Congress instead substituted a new system oftaxation that will potentially collect more taxes from many of our clients than the estate tax”, says Steven Spewak, principal attorney at Estate Plan Strategies, LLC, a St. Louis law finn concentrating its practice in estate planning.
Spewak offers the following observations, insights and recommendations for people to understand and favorably navigate what has transpired:

What Happened. The 2001 tax act, signed into law by President George W. Bush, gradually reduced the maximum Federal estate tax rate from 55% to 45% and increased the amount that could pass free of Federal estate tax from $675,000 per person in 2001 to $3.5 million per person in 2009. Then, in 2010 only, the 2001 tax act repeals the estate tax, only to bring it right back in 20 II, but at a much reduced exemption of $1 million per person and a maximum tax rate of 55%.

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JP Morgan has published a great analysis of how volatility in the oil market can affect your investment portfolio. (Download the entire report here)The following is an excerpt from the report that offers a great summary of its conclusions:

As the situation in the Middle East continues to develop, and inflation concerns arise both here and abroad, it is important to understand the drivers of oil prices, and how they can impact both the economy and markets. Given that the future price of oil is uncertain, investors should position their portfolios in a way that allows them to deal with the volatility that is inherent in oil prices.

Rising oil prices are a doubleedged sword; on the one hand, they force the consumer to spend more of their hard-earned money on imported petroleum products, rather than on domestic goods and services that would contribute to U.S. GDP growth.

On the other hand, higher oil prices can stimulate investment in exploration and alternative energies in an effort to fight these rising oil prices, thereby bringing prices back down and removing them as an obstacle to economic growth.

As noted earlier, the virtual explosion in the offering of hybrid and electric vehicles on the U.S. market in the three years since the 2008 oil price spike is a prime example.

Nevertheless, high oil prices will generally act to dampen both economic growth and demand for oil products, which can result in demand destruction. If this scenario were to play out, a decline in prices could set the stage for a rally in the stock market, pushing long-term rates higher due to improved prospects for future economic growth.

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